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Microsoft marketed Canadian developer i4i's XML software to potential customers at the same time it planned to drive the small firm out of business by infringing its patent, according to court documents filed yesterday with an appeals court.

In a brief submitted to the U.S. Court of Appeals for the Federal District, i4i also argued that the injunction that blocks Microsoft from selling current versions of its popular Word software should stand.

"At the same time Microsoft was praising the improved functionality that i4i's product brought to Word, and touting i4i as a 'Microsoft Partner,' Microsoft was working behind i4i's back to make i4i's product obsolete," i4i's lawyers charged.

"Just five days after i4i's initial meeting with the XML for Word team, for example, Microsoft executives discussed plans for Word and how it would affect the custom-XML authoring market, noting that it would 'eventually make obsolete any competitive attempts by third parties to conquer that market,'" the brief continued.

i4i's filing on Tuesday was the latest round in a patent infringement case the company brought against Microsoft in 2007, when it accused the software giant of using its technology to build XML editing and "custom" XML features into Word 2003, and later in Word 2007.

Microsoft lost the case when a Texas jury awarded i4i $US200 million in damages. In August, U.S. Court Judge Leonard Davis added more than $US90 million in additional damages and interest to Microsoft's bill, and most notably, slapped an injunction on the company that would have prevented it from selling Word 2003 and Word 2007 as of Oct. 10 unless it modified the program and removed the offending features.

Microsoft, which quickly won a fast-track appeal, warned that the injunction would create massive disruptions of its sales, as well as sales of partners like Best Buy, Dell and Hewlett-Packard.

Later, Dell and HP joined Microsoft in claiming heavy burdens if they had to swap out disk images for their new PCs that include Office.

Earlier this month, the Washington, D.C.-based, three-judge panel suspended the injunction while it hears and weighs Microsoft's appeal.

As it laid out its position in its brief, i4i cited evidence from the May trial that it said showed Microsoft was saying one thing, but secretly planning another.

According to i4i, Mark Belk, the chief technology advisor for Microsoft's federal government sales group, contacted the Canadian company to help it sell several agencies, including some in the intelligence community, on Word.

"Microsoft's Belk also praised i4i for having 'a capability that [Microsoft] only ha[s] on the drawing board,'" during an April 2001 meeting with federal agencies, according to i4i.

Within days of that meeting, however, Microsoft was planning to shove i4i out of the XML market, i4i alleged in the brief.

"[I]f we do the work properly, there won't be a need for their [i4i's] product," said Microsoft in an internal document introduced as evidence in the May trial.

"[W]e saw [i4i's product] some time ago and met its creators. Word 11 [Word 2003] will make it obsolete," another Microsoft e-mail said.

The result, said i4i, was that after Word 2003 debuted with custom XML and editing tools, i4i lost 80 per cent of its business and was driven into a niche market serving the pharmaceutical industry.

"Once customers have Microsoft's XML features in Word, they are reluctant to purchase i4i's products," i4i said.

"In other words, as i4i has shown, customers may have purchased Word for other reasons, but they refuse to purchase i4i's XML technology because they already have it in Word."

i4i also dismissed Microsoft's contention that the injunction might put Word, and therefore its Office suite, off the market for months while it created alternate versions of the U.S. market.

"While Microsoft has never asserted that it cannot comply with the injunction, only that it would be difficult or expensive, that is the cost of infringing," said i4i.

Microsoft is to file its rebuttal to i4i's brief no later than noon on Sept. 14. The appeals court will hear oral arguments from the two sides on Sept. 23.

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